Establishing an LLC is at least as simple as establishing an LP, but it is still worth carefully considering which company form best suits our goals.
The greatest advantage of establishing an LLC is that only one person is required to set it up, and the owner of an LLC is not liable towards the company’s creditors with their entire personal assets.
The disadvantage of an LLC is often considered to be that it can be established with a share capital of 3 million HUF. There are several ways to address this issue. A good accountant can provide suggestions for every situation. The share capital should not be a concern, as it can even be provided within three months of the approval of the financial statements for the second full financial year – comprising twelve months – following the company’s registration. If even this presents a problem, the company can also be established with an in-kind contribution.
If you are looking to establish a company, we definitely recommend choosing an LLC as your company form.
To help you decide which company form to choose, we have prepared the following comparison table:
| Comparison Criteria | Limited Partnership (Bt.) | Limited Liability Company (Kft.) |
|---|---|---|
| Minimum Number of Members | 2 people in total: 1 general partner and 1 limited partner | 1 person |
| Extent of Liability | The general partner has unlimited liability, meaning they are liable with their entire personal assets. The limited partner is liable up to the amount of their committed capital contribution. | The company is liable with its entire assets, while the member is liable only up to the amount of their paid-up capital contribution and/or in-kind contribution. |
| Description of Liability | The general partner’s entire personal assets serve as security for satisfying the creditors’ claims, while the limited partner’s capital contribution provides the security. | The LLC as a company is liable for its own debts with its entire assets. The members are not required to be liable with their personal assets even if the company’s assets are insufficient to pay its debts. In such cases, however, the company may be subject to liquidation. This allows the members to clearly determine the extent of the financial risk they are willing to undertake in connection with the company’s activities. This does not, of course, apply to criminal offenses or intentional misconduct, or where the member’s limited liability is set aside. If such circumstances arise, the managing director and/or the members may face criminal proceedings for violations of the law, which may ultimately result in personal liability with their own assets. |
| Amount of Share Capital | No minimum amount of founding capital is prescribed | 3 million HUF |
| Options for Providing Share Capital | In cash, either into the company’s cash desk or into the company’s opened bank account. The costs of company formation can be accounted for against the capital provided at incorporation. By providing an in-kind contribution. | In cash, either into the company’s cash desk or into the company’s opened bank account. The costs of company formation can be accounted for against the capital provided at incorporation. By providing an in-kind contribution. |
| Taxation | The payment obligations are the same for an LP and an LLC. | |
| Dividend Payment | It can be paid to the members based on the balance sheet for the first financial year. | It can be paid to the members based on the balance sheet for the first financial year, provided that the full 3 million HUF share capital has been paid up. |
| Company Formation Process | The general partner is the company’s executive officer, while the limited partner becomes an executive officer only through appointment or election. | The company is managed by at least one person, who does not necessarily have to be one of the company’s owners. |